Mental Health FAQ

If a patient is evaluated in the emergency department and discharged, admitted, or transferred to another facility, the appropriate codes are the ED E/M codes 99281-99285. If the patient's clinical condition and the provider’s interventions and time meet the requirement for critical care, critical care codes 99291-99292 may be reported.

If the patient's condition requires ongoing short-term treatment, assessment, and reassessment in the emergency department, while a decision is being made regarding appropriate disposition (i.e., admission or transfer for inpatient psychiatric care versus discharge); or if the patient will be monitored in the emergency department pending the availability of an inpatient psychiatric bed, Inpatient/Observation codes 99221-99223 (initial Inpt/Obs care w/discharge on a different day) and 99238 or 99239 (discharge day management) or 99234-99236 (admitted and discharged to and from Inpt/Obs on the same date) may be reported.

Per CPT Assistant July 2019 (page 10), the Inpatient/Observation code set may be used to report these encounters. The initial day of care would be reported with 99281-99285, 99291-99292, or 99221-99223, as indicated in FAQ 1. The second day (and third day, and fourth day, etc.) would be reported with a Subsequent Inpatient/Observation Care code (99231-99233). If discharged, the final day of care would be reported using the Inpatient/Observation discharge day codes (99238-99239) OR the Subsequent Inpatient/Observation Care codes if admitted or transferred.

The documentation requirements for observation services as part of mental healthcare are no different from other observation documentation. Per CPT, observation codes are used to report services to patients designated/admitted as “observation status” and include the initiation of observation status, supervision of the care plan for observation, performance of periodic reassessments, and discharge planning, including follow-up and instructions if the patient does not require admission.

To report observation services, CMS states, "There must be a medical observation record for the patient which contains dated and timed physician's orders regarding the observation services the patient is to receive, nursing notes and progress notes prepared by the physician while the patient received observation services. This record must be in addition to any record prepared as a result of an emergency department or outpatient clinic encounter." Practically speaking, the medical record for observation services should include the initial emergency department record supplemented with at least daily progress notes and a discharge summary.

The physician’s order to initiate observation status is a key factor in CMS language. This starts observation care and cannot be done retroactively at the end of a long ED stay to change the billing from ED codes to observation codes. In the case of “psychiatric holds,” the ED provider should document an order to place the patient in observation status pending the availability of an inpatient psych bed to ensure that any additional days in the ED may be reported with the observation codes.

To support reporting subsequent observation care for the additional days, if the patient is monitored in the emergency department, the record should indicate that the patient is receiving active treatment from the ED provider and not simply being boarded pending transfer.

For further information regarding physician observation coding, see the ACEP FAQ regarding Observation Physician Coding.

Examples of active treatment include providing suicide watch precautions, crisis intervention, managing acute and/or chronic medical conditions, medication management, implementing psychiatric consultation recommendations and/or other counseling of the patient or family, and coordinating care with other providers or facilities to expedite transfer/admission. Behavioral health patients may also require a SUDE evaluation (substance use disorder evaluation) or MAT (medication assisted therapy for opiate abuse disorder), or MOUD (Medications for Opioid Use Disorder). Interval re-evaluations and response to treatment should be documented at least daily.

Inpatient/Observation E/M codes are determined based on the level of medical decision making (MDM) or the total time spent by the physician/QHP on the day of the encounter. Time is not typically part of emergency medicine's documentation and coding process. To report based on time, the physician/QHP must document their total time and satisfy time requirements specified in the E/M code level descriptor.

For more information on time as the determining factor for observation E/M level selection, see FAQ 20 in the Observation Physician Coding FAQ. 

For more information on assigning the level of MDM, see the 2023 E/M FAQ.

See the following table for the MDM and Total time requirements for the Inpatient/Observation E/M codes.

99238/99239 – On the day the patient is discharged home or to another facility, the provider who managed the patient’s final day of observation care should report 99238 or 99239 for services provided on the discharge day.

Per AMA, “These codes include, as appropriate, the final examination of the patient, discussion of the hospital stay, instructions for continuing care to all relevant caregivers, and preparation of discharge records, prescriptions, and referral forms.” These elements are included in the discharge service, but are not explicitly required to report 99238/99239. However, a face-to-face encounter is required.

These codes do not require an MDM level and are solely based on time, 30 minutes or less (99238) or greater than 30 minutes (99239).

There is some ambiguity regarding the appropriate code to be used when the patient is admitted or transferred instead of discharged from observation status. The general consensus among coders is to use Subsequent Inpatient/Observation Care codes.

CPT coding guidelines also apply to facilities. As noted above, per CPT Assistant July 2019 (page 10), the Inpatient/Observation code set may be used to report these encounters. In addition, the American Hospital Association (AHA) published similar guidance for facilities in Coding Clinic for HCPCS, Third Quarter 2022, page 8.

Payment policies may vary from payer to payer; mental health coverage is frequently an insurance coverage “carve-out” or out-sourced to a third party. Some insurers may arbitrarily and/or inappropriately deny a claim for observation services if it exceeds certain time limits. In addition, some states are adopting a per diem rate for mental health boarders instead of paying for observation services. You are advised to contact your local payers for their policies on the use of billing observation codes for mental health patient’s services.

CPT Assistant, July 2019, page 10
ACEP Observation Physician Coding FAQ
ACEP Observation Care Payments to Hospitals FAQ